Fair Lending is expected to make its way back to the forefront with regulators, as the new administration gets underway. Fair Lending has long been a “hot topic” among regulators, but there tends to be some back and forth on priority depending on the party affiliation of the administration. With the recent changes in the administration, it is once again expected to be a priority. The Trump administration was not as actively focused on anti-discrimination laws such as the Equal Credit Opportunity Act and the Fair Housing Act as was the Obama administration and what is expected from the Biden Administration. President Biden’s goals were stated in his “Plan to Build Back Better” which focused on an increase in economic inclusion as well as the combating of systemic racism. This goal is expected to be accomplished by federal regulators and agencies acting in unison with the Department of Justice to increase enforcement actions and to place a greater focus on areas of Fair Lending.
While no new significant bills impacting banking have yet passed, we are sure to see significant impact based on the changes in leadership among regulatory agencies. For example, Biden recently appointed Dave Uejio as the Acting Director of the Consumer Financial Protection Bureau (CFPB) and nominated Rohit Chopra to fill the permanent position as director for a period of five years. Rohit has served previously as a CFPB assistant director, a Federal Trade Commissioner, and a Special Advisor at the U.S. Department of Education. Chopra has been an advocate for the use of disparate impact analysis which is an assessment that detects discriminatory lending practices. He has also suggested an increase in data collection efforts and agency focus on mass data surveillance which can be discriminatory and harmful to consumers. Other key agencies which likely to replace leadership and senior officials, indicating administrative enforcement and litigation toward the consumer financial services industry, include Department of Housing and Urban Development (HUD) and the Department of Justice (DOJ).
In the months and years to come, Fair Lending is likely to bolster more regulation and enforcement which will prioritize fair and equal lending issues. Other areas of Fair Lending which we are likely see an increase focus and a possibility of increased restrictions are debt collection and loan servicing as this was an area which was greatly impacted by the COVID-19 pandemic. We should also expect to see an increase in focus and enhanced guidance for Limited English Proficiency (LEP). Until this point, we have seen limited enforcement action declaring LEP fair lending violations or Unfair Deceptive, and Abusive Acts and Practices (UDAAP) as this can be the effect of the limited guidance which currently exists. The CFPB is also likely to revisit regulations under the statues for which it has rulemaking authority such as the 2020 Final Rule for HUD Disparate Impact or the reversal of changes which were made to the CFPB enforcement structure.
To prepare for these changes which are likely in progress, financial institutions should conduct a thorough review of their fair lending policies and procedures to ensure they compliance with federal regulatory expectations and requirements. Financial institutions should stay abreast of regulatory changes and monitor the areas of focus as outlined by regulators and enforcement agencies. And finally, they should consider conducting a review of their loan programs to determine any gaps or disparities in their fair lending process. These changes are coming, so stay proactive and informed.